Reducing the pension contribution rate is a long-term institutional arrangement that adapts to the new situation of economic development. Its policy intention is to relieve the burden on enterprises and promote economic growth. However, in the absence of effective financing channels in the pension system, to maintain the existing pension replacement rate, contribution rate reduction will inevitably exacerbate the risk of fund imbalances; to maintain the financial balance of pension fund, contribution rate reduction will inevitably lead to a decline in the pension replacement rate. Therefore, it is difficult to achieve three goals simultaneously by reducing the pension contribute rate, including maintaining the existing pension replacement rate, keeping financial balance of pension fund, and boosting economic growth. Meanwhile, to comply with the prolonged life expectancy, alleviate the shortage of labor supply, and curb the rapid upward trend of the population dependency ratio, the Chinese government plans to implement a delayed retirement age policy. On the one hand, delayed retirement age helps to improve the financial status of pension fund; on the other hand, it will affect economic growth by acting on capital accumulation and labor supply.So, can delayed retirement age crack the “impossible trinity” of reducing the pension contribution rate?

Based on the neoclassical growth framework and the endogenous growth framework, this paper builds an overlapping generation model to investigate the impacts of pension contribution rate reduction and delayed retirement age on the total output growth rate and the pension replacement rate under the constraint of pension fund balance, and discusses whether delayed retirement age can crack the “impossible trinity” of pension contribution rate reduction. We find that: First, under the said two frameworks, reducing the pension contribution rate always leads to an increase in the total output growth rate and a decline in the pension replacement rate, proving the existence of “impossible trinity”. Second, delayed retirement age always leads to an increase in the pension replacement rate under the said two frameworks, but its impacts on the total output growth rate are diametrically opposed. Delayed retirement age can increase the total output growth rate under the neoclassical growth framework, while the opposite under the endogenous growth framework. Third, whether delayed retirement age can crack the “impossible trinity” depends on the economic growth mode. It can effectively crack under the neoclassical growth mode, while it cannot under the endogenous growth mode. As China’s economic growth mode gradually shifts from neoclassical growth to endogenous growth, it is necessary to remain alert to the potential adverse effect of delayed retirement age.

We contribute to the existing literature in two ways: First, in terms of research ideas, from the perspective of coordinated development of economic growth and people’s livelihood, this paper examines the impacts of pension contribution rate reduction and delayed retirement age on the total output growth rate and the pension replacement rate. It broadens the horizon for theoretical research in the field of public economy. Second, in terms of the research conclusions, this paper confirms that there exists the “impossible trinity” of pension contribution rate reduction and finds that whether delayed retirement age can crack the “impossible trinity” depends on the economic growth mode. It provides a basis for dialectically viewing the effect of delayed retirement age and rationally formulating a delayed retirement age policy.